HIGHER YEARNING

INVESTORS WANT WESTERN INTERNATIONAL UNIVERSITY TO CASH IN ON THE MBA CRAZE. BUT THE SCHOOL HAS YET TO MASTER ITS OWN BUSINESS PROBLEMS

Forty percent of college students at the graduate and undergraduate levels are adults returning to school after years in the workplace. They don't want to think deep thoughts about the lesser existentialist Spanish poets. They want to change jobs or make more money in their current jobs. They have to go to school at night because they have kids and mortgages and they can't quit work to go to school full-time.

From an instructor's point of view, adult learners make wonderful students: They're serious, they know where they're going and they already have highly developed problem-solving skills, so they don't need to be spoon-fed.

College administrators like them, too, because they pay their bills. The student loan default rate at WIU and at the University of Phoenix, for example, is only about 5 percent, one-third the national average.

The small proprietary business schools--some of them chain operations--have not only locked onto the specific needs of those older students, but they have carefully canvassed the students' employers, as well.

In fact, corporate and business America increasingly want a say in what their employees learn. As Chuck Hickman, from the American Assembly of Collegiate Schools of Business, says, "Companies are clearly becoming much more demanding in what kinds of education they are willing to pay for. They want it just in time, and they don't want to pay for knowledges or skills they don't expect to use through the employee, hence the demand for more customized degree and nondegree programs."

The proprietary schools, of course, must suffer more than a bit of condescension from the academic establishment, which regards trade-school degrees as if they were awarded at Montgomery Ward. From that point of view, the theory-based degree, taught by full-time educators, enhances the student's credentials more than a program customized to a current employer.

Theories aside, though, many traditional schools, including ASU, have created part-time and weekend programs to capture part of the adult-executive market. But it's still difficult for them to meet the needs of the local corporate market.

"ASU is a fantastic university," says Intel's Joe Rollins, "but they were a lot more difficult to work with in terms of trying to get them to work with our working adults. Their schedules weren't as flexible, and they weren't willing to tweak anything to satisfy our needs."

Of WIU, Rollins says, "They were willing to make sure their instruction was about today's technology rather than just theory," an opinion echoed by officials at Motorola. Furthermore, the corporate types were impressed that Western International checked in with them monthly to evaluate how its programs and the companies' needs matched up.

WIU is hardly alone in the Phoenix market for adult-executive training. Ottawa University, which offers graduate and undergraduate programs in human resources and education, has campuses in Phoenix and in Tempe (as well as in Kansas and in Wisconsin). DeVry Institute of Technology has eight locations (including one in Phoenix) in seven states, offering undergraduate degrees in business and technology. A sister institution, Keller Graduate School of Management, has two Valley campuses and 15 others in five states. Last year, the parent company of both DeVry and Keller posted gross revenues of $211 million.

Traditional universities have had problems competing with the cost structure at the "upstart" schools, where courses are entirely taught by adjunct faculty. The schools advertise them as "real professionals in the field" as opposed to tweedy and baggy-assed professorial types. What the schools don't advertise is that adjunct instructors come cheaply. At a going rate of $1,000 to $2,000 per course, an adjunct can teach a full-time load and still not make $10,000 per year.

As Haynes says, "What makes it [WIU] look profitable is that on an overall basis, our instructional cost is about 28 to 30 percent, and beyond that, it's a fixed-expense operation." Once the university reaches the break-even point, 70 cents of every tuition dollar drops directly to the bottom line.

So it's no wonder that for-profit schools are proliferating. The University of Phoenix recently wound up on the front page of the Wall Street Journal when its parent company, Apollo Group, which also includes a consulting firm and a publishing company, decided to take its stock public. Apollo touted gross earnings of $97.5 million for the last year, revealing an enormous operation that includes 17 campuses and 16 smaller "learning centers" in seven states and in Puerto Rico. Like WIU, UOP hires only adjunct faculty, and charges dearly for its adult-oriented courses in nursing, education and, of course, business.

Somewhere in this sea of profit and opportunity, Western International University struggles to stay afloat.

Haynes and his fellow investors hope that a UOPish structure will lead to UOPlike profits.

Though the sale to John Cotton's investment group is far from done--there are bureaucratic hurdles to clear with both the U.S. Department of Education and the State of Arizona--the new investors have already made their managerial style clear. On August 26, the day the potential sale was announced, eight senior administrators at WIU--deans and special programs directors and the comptroller--were called into an office and told that their contracts would not be renewed.

"We were surprised," said one, who wanted to be left unnamed. "None of us who were senior managers knew anything about this buyout."

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